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Taxation 


a    lette  r    by 
Otto  H.  Kahn 


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-.UNIVERSITY, 

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^^.^v(Yr<^ 


New  York 
1919 


Taxation 


A     LETTER    BY 

Otto  H.  Kahn 


New  York 
1919 


K2. 


3']'\ 


A   Letter   on   Taxation 

INTRODUCTORY  NOTE 

Although  the  question  of  taxation  will  not  pre- 
sent much  longer  the  acute  problem  which  it  became 
in  consequence  of  our  huge  war  expenditures,  still, 
for  years  to  come,  taxation  will  have  to  be  heavy, 
and  the  wisdom  or  unwisdom  of  our  taxation  policy 
will  materially  affect  the  economic  situation  of  the 
country  for  good  or  evil. 

The  tax  legislation  enacted  by  Congress  for  the 
budget  of  191 8,  1919  and  1920  is  an  almost  perfect 
example  of  what  taxation  measures  ought  not  to  be. 
It  flies  in  the  face  of  economic  science,  of  common 
sense  and  equity.  It  is  cumbersome,  vexatious  and 
almost  incredibly  complex. 

Sectional  and  partisan  in  its  conception  and 
incidence,  whether  deliberately  or  unconsciously,  it 
imposes  burdens  upon  trade  and  commerce  such  as 
exist  in  no  other  country,  while  it  leaves  unused 
other   means   of  raising   revenue   which   would    be 

3 

395829 


A  LETTER  ON  TAXATION 

socially  just  and,  though  barely  perceptible,  if  at  all, 
in  affecting  the  masses  of  the  people,  would  be  vastly 
productive  in  the  aggregate. 

It  discourages  and  lames  enterprise  and  handi- 
caps the  American  business  man  in  competing  in 
the  markets  of  the  world.  It  diminishes  the  oppor- 
tunity for  employment,  both  by  its  actual  and  its 
moral  effect.  Indeed,  I  believe  such  measure  of 
unemployment  as  exists  in  this  country  at  present  is 
due  more  to  our  taxation  laws  than  to  any  other 
single  cause. 

What  those  of  us  who  have  raised  their  voices  in 
criticism  of  these  laws  protest  against  is  not  the 
fact  by  itself  that  they  impose  unparalleled  burdens 
on  capital.  No  right-thinking  man  will  complain  of 
any  burden  or  sacrifice  whatsoever  which  the  needs 
of  the  country  require. 

The  gravamen  of  our  charge  is  that  these 
particular  measures,  in  their  levies  upon  capital, 
greatly  exceed  the  needs  of  the  situation,  apart 
from  having  the  effect  of  facilitating  governmental 
extravagance  and  of  militating  against  that  vigorous 
resumption  of  business  activity  and  enterprise 
which  the  best  interests  of  the  country  demand. 

*        *        * 


A  LETTER  ON  TAXATION 

I  venture  to  hope  that  the  following  letter,  even 
though  the  measure  which  was  pending  at  the  time 
the  letter  was  written  has  since  been  enacted  into 
law,  may  not  be  quite  devoid  of  interest.  To  the 
extent  that  the  views  and  criticisms  it  contains  may 
be  found  to  be  justified,  their  actuality  is  not  di- 
minished by  the  existence  on  the  statute  book  of  a 
measure  which  is  gravely  faulty  and  prejudicial  to 
the  prosperity  of  the  country  at  large. 


* 


I  know  that  I  shall  be  charged  with  being 
actuated  by  self-interest  and  by  a  desire  to  protect 
wealth.  In  anticipation  of  such  an  accusation  it 
may  not  be  improper  for  me  to  say,  however  reluctant 
to  speak  of  my  personal  affairs,  that  since  our  en- 
trance into  the  war,  I  have  not  retained  any  income 
over  and  above  my  family's  and  my  own  living 
expenses;  nor  do  I  intend  to  do  so  for  at  least  one 
year  after  the  conclusion  of  peace,  in  view  of  the 
continuing  needs  which  are  bound  to  follow  in  the 
wake  of  the  war.  Therefore,  from  the  personal 
point  of  view,  a  reduction  of  taxation  would  be  of  no 
benefit  to  me.     But,  even  if  it  were  otherwise,  the 

5 


A  LETTER         ON         TAXATION 

question  is  not  what  are  the  motives  from  which  my 
arguments  and  conclusions  spring,  but  whether  the 
arguments  are  sound  and  the  conclusions  war- 
ranted. 

Otto  H.  Kahn. 


THE  LETTER 

{The  following  letter  dated  December  26, 
igi8,  was  addressed  to  a  correspondent  in  a 
middle  western  city^  in  reply  to  a  communica- 
tion commenting  on  my  views  on  taxation.] 

— o.  H.  K. 

You  and  I  are  far  apart  in  our  conceptions  and 
opinions.  But  I  have  no  doubt  that  you  are  seeking 
to  promote  the  welfare  and  happiness  of  all  the  people. 
If  I  were  not  convinced  that  the  policies  I  advocate 
would  tend  to  serve  that  same  aim  I  certainly  would 
not  venture  to  come  out  in  my  own  name  and  advo- 
cate them  publicly.  My  conclusions  may  be  erron- 
eous, but  I  believe  them  to  be  true  according  to  the 
best  of  my  conscience  and  judgment. 

You  say  that  my  viewpoint  is  that  of  Wall 
Street.  If  by  Wall  Street  you  mean  the  financial 
community  of  New  York,  which  is  as  honorable,  use- 
ful and  patriotic  an  element  in  the  sum  total  of  the 
country's  activities  as  any  other,  I  should  be  hon- 
ored to  be  considered  one  of  its  spokesmen. 

7 


A  LETTER  ON  TAXATION 

I  believe  not  only  Wall  Street,  but  all  unbiased 
men  will  assent  to  the  views  which  I  have  expressed 
in  the  beginning  of  the  speech  to  which  you  refer, 
as  follows: 

"Of  course,  the  burden  of  meeting  the  cost  of 
the  war  must  be  laid  according  to  capacity  to  bear 
it.  It  would  be  crass  selfishness  to  wish  it  laid 
otherwise  and  fatuous  folly  to  endeavor  to  have  it 
laid  otherwise. 

"We  all  agree  that  the  principal  single  sources 
of  war  revenue  must  necessarily  be  business  and 
accumulated  capital,  but  these  sources  should  not 
be  used  excessively  and  to  the  exclusion  of  others. 
The  structure  of  taxation  should  be  harmonious 
and  symmetrical.  No  part  of  it  should  be  so 
planned  as  to  produce  an  unscientific  and  dan- 
gerous strain. 

"The  science  of  taxation  consists  in  raising  the 
largest  obtainable  amount  of  needed  revenue  in 
the  most  equitable  manner,  with  the  least  economic 
disturbance  and  as  far  as  possible  with  the  effect  of 
promoting  thrift. " 

You  say:    "Mr.  Kahn  is  opposed  to  the  heavy 

taxation  of  the  profits  arising  solely  from  the  war." 

In  this  you  are  wholly  mistaken.      I  am  not  only  not 

opposed  to  heavy  taxation  of  such  profits,  but  have 

advised  a  war-profit  tax  of  eighty  per  cent,  provided 

it  is  really  a  war-profit  tax.    I  have  said  publicly  that 

8 


A  LETTER  ON  TAXATION 

"To  permit  individuals  and  corporations  to  enrich 
themselves  out  of  the  dreadful  calamity  of  war  is 
repugnant  to  one's  sense  of  justice,  and  gravely 
detrimental  to  the  war  morale  of  the  people." 

/  have  advocated^  as  long  as  needed^  income 
taxation  in  America^  as  heavy  as  exists  at  present  in 
any  of  the  other  great  countries — but  not  heavier. 

And  I  have  also  advocated  and  still  advocate 
consumption  and  similar  small  taxes — so  small  in 
their  units  that  they  could  not  possibly  be  a  burden 
on  "  the  man  in  the  street,"  or  to  affect  in  any  way 
the  activities  and  consuming  power  of  the  country. 

If  this  is  the  "viewpoint  of  Wall  Street,"  then 
the  viewpoint  of  the  vast  majority  of  economists,  of 
living  and  dead  authorities  on  taxation  and  of  the 
governments  and  parliaments  of  England,  France, 
Italy,  etc.,  is  the  viewpoint  of  Wall  Street. 

England,  France  and  Italy  are  probably  quite  as 
democratic  as  we  are.  They  do  not  love  rich  men 
more  than  we  do.  Yet  all  of  these  countries  have 
taxes  of  the  kind  I  advocate.  None  of  them  has 
imposed  income  taxes  at  rates  rising  anywhere  near 
as  high  as  ours  for  191 9  and  1920.  The  maximum 
rate  of  income  taxation  in  England  is  fifty-one  and 
two-thirds  per  cent,   and   that  is   the  highest  rate 

9 


A  LETTER         ON         TAXATION 

existing  in  any  European  country.  With  us,  under 
the  pending  bill,  it  is  seventy-seven  per  cent  for  the 
current  year.  And  it  must  be  remembered  that  the 
Allied  countries  have  been  at  war  for  over  four  years, 
and  we  barely  a  year  and  a  half. 

If  all  nations  except  Bolshevist  Russia  have 
stopped  at  certain  limits  of  income  taxation,  the 
reason  is  simply  that  they  recognize  the  unwisdom  and 
economic  ill  effect  of  going  beyond  these  limits.  They 
know  the  old  axiom  of  taxation  that  an  excessive  impost 
destroys  its  own  productivity.  They  also  recognize 
the  fundamental  fallacy  of  the  widespread  and 
plausible  conception — which  you  endorse — that  the 
expenditure  of  money  by  the  Government  has  or  can 
possibly  have  the  same  effect  upon  the  country's 
progress,  prosperity  and  well-being  as  the  use  of  his 
surplus  funds  by  the  individual. 

Surely  the  governments  in  other  countries  cannot 
all  be  wrong-headed  or  ill-advised  or  ignorant  of  the 
science  of  taxation  or  unfair  to  ''the  man  in  the  street^'' 
and  our  Congress  alone  right! 


10 


LETTER         ON         T     A     X     A     T     I     O     N 


Apart  from  being  subject  to  consumption  taxes, 
the  British  "man  in  the  street"  pays  income  tax; 
ours  does  not.  British  income  taxation  starts  with 
incomes  of  $650;  ours  starts  (for  married  men)  with 
incomes  of  $2,000.  Furthermore,  the  British  tax  on 
small  incomes,  say  up  to  $5,000,  is  on  the  average 
from  three  to  four  times  heavier  than  it  is  here. 

Let  it  be  understood  that  I  make  this  comparison 
in  order  to  meet  the  point  you  have  raised  as  to  "  the 
man  in  the  street"  and  not  in  order  to  suggest  that 
we  should  follow  the  British  precedent  of  heavy  taxa- 
tion of  very  small  incomes,  which  "  over  there  "  is 
doubtless  not  a  matter  of  choice,  but  of  necessity, 
but  with  us,  fortunately,  is  no  necessity.  I  consider 
our  scale  of  income  tax  gradation  in  respect  of  small 
incomes  as  juster  than  the  English  scale  and  greatly 
preferable  to  it.  But  our  just  moderation  in  that 
respect  makes  all  the  more  conspicuous  the  unneces- 
sary and  harmful  extreme  to  which  we  go  at  the  other 
end  of  the  scale. 


I  wonder  whether  you  realize  the  wholly  un- 
precedented burden  which  the  taxation  bill,  about  to 
be  adopted  in  Congress,  imposes  on  large  incomes  for 

11 


A  LETTER         ON         TAXATION 

1 91 9  and  1920.  Let  me  give  you  some  examples,  and 
in  pondering  them  please  remember  that  the  com- 
pelling emergency  of  war  no  longer  exists. 

Let  us  take  the  case  of  a  man  whose 

income  is l5oo,coo 

The  average  Federal  Income  Tax  on  this 

for  1919  is  64.60%,  equalling 323,000 


Leaving,  ^177,000 

From  this  remainder  must  be  deducted  State 
and  municipal  imposts  of  various  kinds.  There  must 
also  be  taken  into  account  contributions  to  charities 
and  to  other  undertakings  for  the  public  good  which 
contributions  to  all  intents  and  purposes  amount  to  a 
taXjin  the  case  of  every  right-minded  man,even  though 
a  voluntary  tax. 

It  may  then  be  taken  that  out  of  $500,000 
income,  there  is  left  from  $100,000  to  $150,000  for  a 
man  to  defray  his  own  and  his  family's  expenses  and 
to  meet  the  demands  of  his  business^  or  otherwise  to 
save  and  invest. 

In  the  case  of  earnings  as  high  as  $1,000,000  the 
average  federal  income  tax  is  70.30  per  cent  (i.  e. 
$703,000),  which  means  that  after  making  provision 
for  State  and  municipal  imposts,  charitable  contribu- 

12 


A         LETTER         ON         TAXATION 

tions,  etc.,  there  would  be  left,  say,  from  $150,000 
to  1250,000. 

Or,  let  us  take  the  case  of  a  man  whose 

earnings  for  the  year  are ^200,000 

Average   Federal   Income   Tax   50.50%, 

equalling 101,000 

Leaving,     199,000 

There  would  thus  be  left,  after  making  provision 
for  State  and  municipal  imposts  and  charitable  con- 
tributions, etc.,  say,  from  |6o,ooo  to  $70,000. 

You  may  say,  "Why,  that  still  leaves  them  more 
than  plenty  to  live  on;  a  vast  deal  more  than  the 
majority  of  the  people  have."  Granted!  But  that  is 
not  the  point. 

You  may  say,  "No  one  ought  to  be  allowed  to 
earn  incomes  as  large  as  those  you  have  cited." 
But  again,  that  is  not  the  point.  The  time  may  or 
may  not  come  when  a  limit  may  be  placed  on  what  a 
man  may  earn.  Thus  far,  no  civilized  nation  has 
ventured  upon  such  a  step.  Its  consequences  and 
repercussions  would  be  almost  incalculable. 

At  any  rate,  if  we  ever  want  to  make  so  funda- 
mental an  alteration  in  our  economic  order,  the 
proposition  needs  first  to  be  exhaustively  discussed 

13 


A  LETTER         ON         TAXATION 

before  the  people  in  all  Its  bearings,  so  that  its 
inevitable  consequences  may  be  clearly  understood, 
and  the  people  should  pronounce  themselves 
upon  the  subject  definitely  and  unmistakably. 
Certainly,  it  should  not  be  sought  to  be  accom- 
plished by  indirection  and  without  a  direct  mandate, 
in  the  guise  of  a  tax  bill. 

The  point  is  that  by  such  taxation,  under  the 
existing  social  and  economic  system,  you  kill  the 
goose  that  lays  the  golden  eggs.  You  cripple  incen- 
tive, effort,  enterprise,  commercial  and  financial 
venturing,  and  prevent  necessary  accumulation  for 
the  upkeep  and  expansion  of  business  and  for 
world  trade. 

What  degree  of  financial  incentive  is  left  to  a 
man,  if  he  gets  this  kind  of  a  deal:  If  he  makes  |ioo, 
he  gets  from  %io  to  $30,  and  the  Government  gets 
from  |6o  to  |8o  in  direct  taxes  (including  State  and 
municipal  imposts),  without  counting  indirect  taxa- 
tion? Is  it  a  reasonable  deal — especially  now  that 
the  war  is  over — according  to  any  theory  except  that 
of  socialism,  and  do  we  in  this  country  want  socialism 
with  all  it  would  be  bound  to  lead  to? 

When  you  once  leave  the  level  road  of  Ameri- 
canism to  set  foot  upon  the  incline  of  international 

14 


A  LETTER         ON         TAXATION 

socialism,  it  is  no  longer  in  your  power  to  determine 
where  you  will  stop.  If  you  tolerate  grave  infringe- 
ment upon  the  just  rights  of  property,  all  history 
shows  that  you  will  have  laid  open  to  assault  the 
foundations  of  personal  liberty,  the  institution  of 
marriage,  the  sanctity  of  the  home,  and  the  prin- 
ciples and  practices  of  religion.  It  is  an  axiom  only 
too  well  attested  by  the  experience  of  the  past  that 
the  principal  elements  of  the  established  order  of 
civilization  (of  which  private  property  is  one)  are 
closely  inter-related. 


* 


Nothing  is  more  important  •  for  this  country^ 
indeed  for  all  countries,  under  the  circumstances 
created  by  the  war,  than  increased  production.  It  is  the 
only  way  to  make  good  the  financial  and  economic 
ravages  of  the  war  and  to  bring  about  lastingly  better 
conditions  for  the  masses  of  the  people.  It  is  the  only  way 
to  intensify  the  creation  of  national  wealth  and  to  broaden 
the  opportunity  for  employment. 

But  increased  production  necessarily  means  the 
use  of  increased  capital.  It  means  that  the  business 
man  must  have  a  surplus  at  the  end  of  the  year  in 
order  to  perfect  his  plant,  to  enlarge  his  operations, 

15 


A  LETTER         ON         TAXATION 

etc.  Where  is  he  to  find  that  surplus  if  taxes  are  so 
heavy  that  they  leave  him  little  or  no  surplus  after 
meeting  his  own  and  his  family' s  expenses?  How  is  he 
to  hold  his  own  against  the  European  business  man 
if  he  pays  both  higher  wages  and  higher  taxes?  (Let  me 
add  that  I  am  wholly  in  favor  of  high  wages,  pro- 
vided that  they  are  accompanied  by  adequate 
output.) 

How  is  he  to  find  markets  abroad  for  his  goods 
under  such  conditions^  except  such  goods  as  foreign 
countries  cannot  obtain  elsewhere?  And  remember  that 
markets  abroad^  which  means  markets  for  our  surplus 
products^  i.  e.  for  that  part  of  our  products  which  we 
cannot  absorb  at  home ^  are  wanted  not  primarily  for 
the  benefit  of  business,  but  for  the  benefit  of  our  working- 
men  and  farmers. 

*        *        * 

Bear  in  mind  that  the  examples  I  have  given 
relate  to  earnings  which  are  not  war  profits  or  so- 
called  excess  profits.  If  we  take  cases  in  which  the 
war  profits  tax  or  excess  profits  tax  applies,  the  per- 
centage which  is  left  to  a  man  out  of  his  earnings 
would  be  still  smaller,  and  the  percentage  taken  by 
the  State  still  larger. 

16 


A  LETTER  ON  TAXATION 

I  have  given  figures  only  of  income  taxes,  but 
you  must  remember  that  business  men  have  to  pay 
these  huge  income  taxes  on  top  of  the  excess  profits 
or  war  profits  taxes.  I  repeat  that  I  am  entirely  in 
favor  of  the  heaviest  practicable  war-profits  tax,  but 
there  is  no  other  country  as  yet  which  has  imposed 
excess  profits  taxes  as  supplementary  to  war  profits 
taxes,  and  it  would  be  difficult  to  invent  a  form  of 
taxation  more  calculated  to  prevent  new  and  vigorous 
enterprise  than  that  unique  method  devised  by  those 
in  charge  of  our  revenue  legislation. 

Ij  we  pay  labor  the  highest  wages  existing  anywhere 

but  restrict  capital  and  enterprise  to  the  lowest  return 

existing  anywhere^  how  can  we  possibly  compete  in  the 

markets  of  the  world  in  the  long  run,  or  even  maintain 

our  home  market  against  the  more  favorably  situated 

foreigner?    How  can  we  possibly  get  anywhere  by  that 

system  but  to  stagnation  and  retrogression?    How  can 

the  individual  business  man  expand  his  business  and 

increase  production  and  output?    And  how  can  labor 

be  abundantly  employed  and  well  paid  and  the  small 

business   man   and  the  farmer  be  prosperous   unless 

business  at  large  is  enabled  to  expand  and  grow  and 

prosper? 

nn       *       * 


17 


A  LETTER         ON         TAXATION 

I  do  not  plead  for  any  plan  of  taxation  that  will 
spare  wealth.  I  do  plead  for  a  system  and  methods 
which,  by  taking  account  of  tested  and  immutable 
principles  which  cannot  be  disregarded  with  impunity, 
will  preserve  the  economics  of  the  country  on  an  even 
keel;  a  system  and  methods  which,  without  tender- 
ness for,  yet  without  animus  against  those  who  have 
been  materially  successful,  will  adjust  the  financial 
burden  of  government  fairly  and  equitably,  without 
fear  or  favor,  among  all  those  who  can  afford  to  bear 
a  part,  however  small. 

I  do  not  mean  in  this  letter  to  go  into  a  discussion 
of  other  features  of  our  federal  taxation  measure,  but 
I  venture  to  say  without  fear  of  contradiction  that 
the  overwhelming  majority,  not  only  of  economists 
and  experts  in  taxation,  but  of  all  those  who  have 
given  study  to  the  subject,  consider  our  tax  legislation 
as  crude,  cumbersome,  vexatious,  unjust,  complex  and 
altogether  unscientific.  It  penalizes  thrift  and  industry 
and  leaves  the  wastrel  and  shirker  untouched.  At  a 
time  when  every  incentive  should  be  given  to  stimulate 
effort  and  promote  productive  activity,  it  discourages, 
disturbs  and  impedes  the  American  business  man  and 
places  him  at  a  grave  disadvantage  as  against  his 
European  competitor.     At  a  time  when  America  is 

18 


A  LETTER         ON         TAXATION 

aiming  to  become  a  world  center.,  it  deters  foreign 
capital  from  coming  here.  At  a  time  when  our  boys  are 
coming  back  expecting  to  resume  their  peaceful  occu- 
pations^ it  is  a  breeder  of  unemployment. 

I  venture  to  say  that  it  would  be  an  easy  task 
for  a  committee  of,  say,  twelve  men,  composed  of 
senators,  congressmen,  business  men,  economists, 
farmers  and  laboring  men,  approaching  their  task 
free  from  political,  social  and  sectional  bias,  to  devise 
a  measure  which  would  produce  at  least  as  great  a 
revenue  as  is  provided  in  the  taxation  bills  of  191 8 
and  1919,  would  be  no  less  in  accord  with  the  dic- 
tates of  social  justice,  and  yet  would  weigh  far  more 
lightly  upon  the  country.  Such  a  committee  would 
not  be  unmindful  of  the  manifest  propriety  of  placing 
the  main  burden  of  taxation  upon  those  best  able  to 
bear  it.  But  neither  would  it  be  unmindful  of  the 
many  sources  of  easily  collectable,  easily  borne 
taxation,  such  as  all  other  countries  have  resorted  to. 
Nor  would  it  look  upon  material  success  as  some- 
thing akin  to  guilt. 

I  believe  it  is  not  too  much  to  say  that  our 
taxation  measures  of  this  and  the  past  year,  in  spirit 

19 


A  LETTER         ON         TAXATION 

and  effect,  bear  the  distinct  ear-marks  of  class  and 
sectional  legislation.  And  the  results  of  class  or 
sectional  legislation,  whether  for  or  against  capital, 
have  always  been  and  are  bound  to  be  pernicious. 

Very  truly  yours, 

{Signed)  Otto  H.   Kahn. 

P.  S. — You  say,  "  No  man  ever  earned  $i  ,000,000 
in  one  year.  Incomes  of  that  size  must  of  necessity 
be  based  on  a  foundation  of  legislative  privilege  and 
have  a  super-structure  of  monopoly." 

Let  us  consider  the  following  case  as  an  example: 
Through  the  organizing  genius  and  enterprise  of 
a  self-made  man,  Mr.  Henry  Ford  (not  by  monopoly, 
but  in  keen  competition  with  other  manufacturers), 
the  automobile,  instead  of  being  a  luxury  of  the  few, 
has  been  brought  within  the  reach  of  those  of  modest 
means. 

The  cost  of  the  product  has  been  vastly  cheap- 
ened. The  margin  of  profit  on  each  automobile  sold 
has  been  greatly  diminished.  Wages  have  been  very 
largely  increased,  the  living  conditions  of  employees 
greatly  improved.  Work  has  been  found  for  a  great 
many  more  men  than  were  employed  before. 

20 


A  LETTER  ON  TAXATION 

In  Other  words,  every  single  human  factor  con- 
cerned in  either  production  or  consumption  has  been 
advantaged.  New  wealth  has  been  created  at  the 
expense  of  no  one.  It  cannot  be  said  that  it  was 
created  by  the  workingman,  except  in  the  physical 
sense.  It  was  not  created  by  either  monopoly  or 
privilege.  It  was  created  mainly  out  of  Mr.  Ford's 
brain  and  at  his  risk. 

By  far  the  largest  percentage  of  this  new  wealth 
goes  to  pay  the  wages  of  workingmen  and  other 
expenses  of  the  business,  but  out  of  what  is  left,  Mr. 
Ford's  share  is,  by  common  report,  in  excess  of 
$1,000,000  a  year. 

1.  Did  Mr.  Ford  earn  1 1,000,000  in  one  year? 
If  not,  how  much  did  he  earn?  By  what  scale  would 
you  measure  the  proportion  due  to  him  of  the  new 
wealth  created  mainly  by  his  faculties? 

2.  If  he  had  not  been  allowed  to  earn  the  large 
sums  which  he  did  earn,  how  and  where  could  he 
have  found  the  means  to  enlarge  and  improve  his 
factory,  so  as  to  make  possible  an  enterprise  which 
immensely  cheapened  the  product  to  the  consumer 
and  largely  increased  the  wages  to  the  workingman 
and  the  opportunity  for  employment?  Is  there  any 
instance    where    communistic    or    even    merely    co- 

21 


LETTER         ON         TAXATION 


operative  undertakings  have  produced  similar  results? 
Is  there  any  instance  where  governmental  manage- 
ment has  produced  similar  results? 

O.  H.  K. 


22 


OS,' 


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